Hiring burst of 162,000 jobs in August puts the focus squarely back on
inflation in the US
[September 05, 2026] By
PAUL WISEMAN
WASHINGTON (AP) — The U.S. labor market bounced back in August as
employers added a surprising 162,000 jobs, ending a summer of lackluster
hiring with a bang.
The unemployment rate remained at a low 4.1%.
Hiring far exceeded the 65,000 jobs that forecasters had expected,
according to a poll by FactSet. Labor Department revisions also looked
good, adding 55,000 to June and July payrolls. Employers created 21,000
jobs in July; the Labor Department had originally reported that they’d
cut 23,000.
Two months before the midterm elections, President Donald Trump welcomed
the strong hiring report Friday. “Great jobs number just announced,
breaking all estimates (except mine!) by double and triple - And you
haven’t seen anything yet!” Trump wrote in a social media post.
But inflation has dominated conversations this year in business and
households. Voters are increasingly frustrated by higher costs,
particularly fuel prices that have hit record levels since the U.S. and
Israel attacked Iran in late February.
And meager pay raises have made rising prices more painful for many.
Average hourly wages rose 3.1% last month from a year earlier, the
weakest year-over-year increase since May 2021.
Restaurants and bars added 59,000 jobs last month, construction
companies 22,000 and manufacturers 16,000. Factory jobs are up by 58,000
since hitting a recent low in December, the Labor Department noted.
And the U.S. labor force — the number of people working or looking for
work — jumped by 683,000 last month after falling in June and July.
Diane Swonk, chief economist at the tax and consulting firm KPMG, called
the report “incredible. It’s a summer heatwave.’’ She noted that a broad
measure of the unemployment rate – which includes people so discouraged
they’ve given up looking for work and those working part time because
they can’t find the full-time jobs they want – dropped to 7.7%, the
lowest in more than a year.
So far this year, employers — companies, government agencies and
nonprofits — have added an average of more than 80,000 jobs a month.
That is up from a dismal monthly average of 9,700 last year.
But job creation remains well below the 166,000 monthly jobs that were
the norm in 2023 and 2024, let alone the 491,000 a month recorded during
the 2021-2022 hiring boom that followed pandemic lockdowns.
Hiring has bounced around this year. From May through July, employers
added a lackluster average of 38,000 jobs a month. Then came the burst
of new jobs in August, which left some economists skeptical. “The
rebound in hiring this month is encouraging,’’ wrote Thomas Simons,
chief U.S. economist at the investment bank Jefferies, “but we suspect
that it’s more of a payback from weakness over the prior three months
rather than a sign of significant acceleration.’’
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 Friday’s report may increase the
likelihood that the Federal Reserve will raise its key short-term
interest rate when it next meets Sept. 15-16. Solid hiring sends a
signal that current borrowing costs aren’t necessarily high enough
to restrain the economy and cool inflation.
Fed Chair Kevin Warsh said last week that inflation, at 3.7%
according to the Fed’s preferred measure, remains too far above the
central bank’s 2% target and added that without further progress,
the Fed would have “work to do.”
With hiring seemingly healthy, the Fed’s focus will shift to a
critical inflation report due next week. On Thursday, Fed governor
Christopher Waller said he is leaning toward keeping the Fed’s rate
unchanged, but would support a hike if inflation comes in high.
U.S. employers are contending with a shortage of workers — the
result of President Donald Trump's immigration crackdown and the
retirement of baby boomers.
Instead of looking to hire from a diminished pool of available
workers, “businesses are increasingly focused on boosting efficiency
through technology and AI and increasingly seek to do more with
their existing workforce,’’ EY-Parthenon economists Gregory Daco and
Lydia Boussour wrote in a commentary this week.
The information industry, which includes employers in
telecommunications and data processing, lost 23,000 jobs last month
and is down 97,000 since the start of 2026, a decline that has
arrived as artificial intelligence does work that was once handled
by people.
Trevor Freel, a senior recruiter at the American Medical
Association, said that AI appears to be replacing people in customer
service and software development. He asked one job candidate in
customer service why he was looking for a new job. The answer:
“Well, I got replaced by a robot.’’
Karp & Iancu, a fast-growing Milwaukee law firm that specializes in
divorce and family law, has added three employees this month. As
technology, specifically AI, changes legal work, managing partner
David Iancu said that he’s looking for applicants with technical
skills, or those who are willing to learn. But that’s not all.
“AI is an incredible tool. It’s not much more than that,’’ said
Iancu, whose firm has 55 employees, including 30 lawyers. “It does
not substitute for good people or human relationships. I don’t know
about you, but when I try to call customer service and I have to
talk to a robot – I’m not feeling it ... Especially where people are
dealing with something that’s difficult like divorce or medical
(problems) – they don’t want AI as a substitute ... I have no plans
to replace people with AI.’’
___
AP Economics Writer Christopher Rugaber and AP Writer Will Weissert
contributed to this story.
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